Effects of inflation or
deflation.We do not consider the
effects of inflation or deflation to be material to our financial position and
results of operations.New
Accounting PronouncementsSFAS No. 157, Fair
Value Measurements (SFAS No. 157) is effective for fiscal years beginning
after November 15, 2007. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in accordance with accounting principles
generally accepted in the United States, and expands required disclosures about
fair value measurements. The adoption of SFAS No. 157 as of February 3, 2008 did
not have a material impact on our operating results or financial
position.SFAS No. 159,The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159) is effective for fiscal
years beginning after November 15, 2007. SFAS No. 159 establishes a fair value
option under which entities can elect to report certain financial assets and
liabilities at fair value, with changes in fair value recognized in earnings.
The adoption of SFAS No. 159 as of February 3, 2008 did not have a material
impact on our operating results or financial position.Forward-Looking StatementsThis report may contain a number of forward-looking statements regarding,
without limitation, planned store growth, new markets, expected sales, projected
earnings levels, capital expenditures and other matters. These forward-looking
statements reflect our then current beliefs, projections and estimates with
respect to future events and our projected financial performance, growth,
operations and competitive position. The words plan, expect, anticipate,
estimate, believe, forecast, projected, guidance, looking ahead and
similar expressions identify forward-looking statements.Future economic and industry trends that could potentially impact
revenue, profitability, and growth remain difficult to predict. As a result, our
forward-looking statements are subject to risks and uncertainties which could
cause our actual results to differ materially from these forward-looking
statements and our expectations and projections. Refer to Part II, Item 1A in
this quarterly report on Form 10-Q for a more complete discussion of risk
factors for Ross and dds DISCOUNTS. The factors underlying our forecasts are
dynamic and subject to change. As a result, any forecasts or forward-looking
statements speak only as of the date they are given and do not necessarily
reflect our outlook at any other point in time. We disclaim any obligation to
update or revise these forward-looking statements.Other risk factors are detailed in our filings with the Securities and
Exchange Commission including, without limitation, our annual report on Form
10-K for 2007.Item 3.
Quantitative and Qualitative Disclosures about Market RiskWe are exposed to market risks, which primarily include changes in
interest rates. We do not engage in financial transactions for trading or
speculative purposes.

We occasionally
use forward contracts to hedge against fluctuations in foreign currency prices.
We had no outstanding forward contracts as of May 3, 2008.

Interest that is payable on our
revolving credit facilities is based on variable interest rates and is,
therefore, affected by changes in market interest rates. In addition, lease
payments under certain of our synthetic lease agreements are determined based on
variable interest rates and are, therefore affected by changes in market
interest rates. As of May 3, 2008, we had no borrowings outstanding under our
revolving credit facilities.

In addition, we issued notes to
institutional investors in two series: Series A for $85.0 million accrues
interest at 6.38% and Series B for $65.0 million accrues interest at 6.53%. The
amount outstanding under these notes as of May 3, 2008 is $150.0
million.

Interest is receivable on our
short and long-term investments. Changes in interest rates may impact the fair
value of the Companys investment portfolio.

21

A hypothetical 100 basis point
increase or decrease in prevailing market interest rates would not have
materially impacted our consolidated financial position, results of operations,
cash flows, or the fair values of the Companys short and long-term investments
as of and for the three month period ended May 3, 2008. We do not consider the
potential losses in future earnings and cash flows from reasonably possible,
near term changes in interest rates to be material.